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IRS Issues Foreign Financial Account Reporting Guidance

The
IRS issued a second notice giving guidance on various reporting
requirements under the Foreign Account Tax Compliance Act (FATCA,
part of PL 111-147) (Notice 2011-34).
The notice responds to concerns raised by commenters following the
issuance last
August of Notice 2010-60, which contained preliminary guidance on
implementation of the FATCA rules.

FATCA expanded
the information reporting requirements for foreign financial
institutions with respect to certain United States accounts. It also
imposed withholding, documentation and reporting requirements with
respect to certain payments made to certain foreign entities.

Notice
2011-34 provides the procedures for participating foreign financial
institutions to follow in identifying U.S. accounts among their
pre-existing individual accounts. It also defines what a
pass-through payment is for FATCA purposes and provides guidance on
withholding on pass-through payments.

The
notice also lists certain categories of foreign financial
institutions that will be deemed to be compliant. These include
certain local banks and certain investment vehicles. However, to be
deemed compliant, such foreign financial institutions will have to
apply for deemed-compliant status, obtain a foreign financial
institution identification number, and certify every three years to
the IRS that they meet the requirements for such treatment.

The
notice discusses foreign financial institutions’ obligations to
report U.S. accounts. It also addresses the treatment of qualified
intermediaries. Finally, the notice provides guidance on the
application of IRC § 1471 to affiliated groups of foreign financial institutions.